London fintech punches above its weight, but it still needs to stay ahead of the curve
As other cities continue to tempt away our London tech firms and other investment, we need to work even harder to stay competitive, writes Chris Hayward.
If there was ever a sector in which the UK was punching well above its weight, it’s our fintech and start-up scene. The UK’s world-leading fintech sector has a 10 per cent global market share and our success is reflected by the historic levels of investment into the sector over the last five years.
Fintech brings together our existing strengths in financial services with our growing tech expertise. The result is a sector that ranks third globally in terms of venture capital invested, behind the United States and China. Last year alone, over $12.5bn was invested in UK fintech. That investment supports our outstanding fintech companies, of which over half of Deloitte’s top 50 fintech firms are based here in London, whilst a further 2000 businesses are spread across the UK in fintech hot spots like Cardiff, Leeds, Edinburgh and Bristol.
To truly harvest our fintech rewards, to ensure that London and the wider UK remains a world-leader for years to come, we need a concerted effort to continue innovating, building partnerships, and investing. The Kalifa Review, published in early 2021, warned that a “digital big bang” was necessary for the UK to remain competitive in the sector.
A key recommendation was a Centre for Finance, Innovation, and Technology, to strengthen national coordination across the fintech ecosystem to boost growth. This was finally launched recently, with the financial backing of Treasury.
Since Kalifa, the government has worked closely with industry and regulators to deliver on other recommendations, including introducing a fast-track visa system for fintech scale ups to make it easier for firms to recruit and retain talent.
Most crucial, is the continued work to reform our listings regime to keep London an attractive destination to list. This has received increasing attention in recent weeks, as firms continued to choose the US over London. Canada’s annual benchmarking report of global financial centres performances has highlighted the increasing levels of investment being drawn away from our shores. Part of ensuring these businesses are not drawn to Wall Street or elsewhere is plugging the funding gap that high-growth firms like those in fintech face.
The UK’s strengths in fintech are in areas such as payments, wealthtech, and especially regulation technology. With rules growing and evolving to keep up with technological changes, it’s up to businesses to be proactive and detect and prevent compliance issues within their own operations, but for many this is costly and inefficient. Regulation tech creates a cost effective way to deliver productivity gains, and keep costs down – essential requirements if a firm is to remain competitive in financial services. The sector has drawn nearly £14bn of funding in the last couple of years.
We should be nurturing competitive strengths in fintech. Canada Corporation and Innovate Finance are working together to build on this. Creating further successful regulation tech will enable all future fintech companies to succeed in the future, with a strong backbone to focus on growth while meeting regulatory requirements.
Since the Kalifa Review, our fintech sector has made significant progress, moving from strength to strength. It is crucial that collectively, across government, regulators, and industry, we continue to address the challenges facing the industry and do all we can to maintain our fintech crown.